Taxation and revenue policies for future Federal highway programs

In a world of tight budgets and growing investment needs, the question of how highways of national significance will be financed in the future has never been more important. This paper provides a background for addressing this question by tracing the development of current Federal highway tax and revenue policies, describing recent trends in Federal highway finance, and discussing several limitations on the productivity of existing Federal highway revenue sources. Principles of taxation that can be used to guide the search for future revenue sources are then described, current Federal highway user fees are reviewed within the context of those principles, and the additional revenue potential of the existing highway tax structure is discussed. Potential alternative sources of highway revenue are then discussed and selected alternative funding mechanisms are described.